Banks v Ferrari
[2000] NSWSC 874
•7 August 2000
CITATION: Banks v Ferrari & Ors [2000] NSWSC 874 revised - 4/09/2000 CURRENT JURISDICTION: Common Law FILE NUMBER(S): SC 11699/99 HEARING DATE(S): 02/02/00
07/08/00JUDGMENT DATE: 7 August 2000 PARTIES :
Beverley Joy Banks- Appellant
Luisa Ferrari, John Fausto Ferrari and Ferrari Enterprises of Australia Pty Limited- RespondentsJUDGMENT OF: Dowd J at 1
LOWER COURT
JURISDICTION :Local Court LOWER COURT
FILE NUMBER(S) :450/97 LOWER COURT
JUDICIAL OFFICER :Barkell M
COUNSEL : Mrs Banks in person
Mr Bellamy- RespondentsSOLICITORS: Gordon Robilliard & Plowman Solicitors- Respondents CATCHWORDS: Justices Act 1902 (NSW) - Appeal - Detinue - Bailment - Rejection of subject property by Trustee in Bankruptcy - Entitlement to bring detinue proceedings LEGISLATION CITED: Justices Act 1902 (NSW)
Bankruptcy Act 1966 (Cth)
Privacy Act 1988 (Cth)
Freedom of Information Act 1982 (Cth)
Corporations LawCASES CITED: The Winkfield [1900-1903] All ER 346.
Coleman v Harvey [1989] 1 NZLR 723.
Bellinger v Autoland Pty Ltd [1962] VR 514.
Timewell v Virgoe (1868) 5 WW&A'B L 147.
EE McCurdy Ltd (In Liq) v Postmaster-General [1959] NZLR 553.
Sutherland v Brien (Unreported, Austin J, 1 March 1999, Supreme Court of New South Wales).
CanWest Global Communication Corporation v Australian Broadcasting Authority (1997-1998) 50 ALD 877.
Re Mineral Securities Australia Ltd (In Liq) and the Companies Act (1973) 2 NSWLR 207.
Armory v Delamirie [1588-1774] All ER 121.
Jeffries v Western Railway Co (1856) 5 E&B 802.
Horne v Richardson (1970) 64 QJPR 47.
Leake v Loveday and Brooks 134 ER 399.
George Barker (Transport) Limited v Eynon (1974) 1 WLR 462.
Majeau Carrying Company Pty Limited v Coastal Roftile Ltd (1972-1973) 129 CLR 48.
Keene v Carter (1994) 12 WAR 20.
Daemar Industrial Commission of NSW and Another (1990-1991) 22 NSWLR 178.
O'Brien v Clyne and Another (1985-1986) 64 ALR 129.DECISION: 1. Plaintiff has an entitlement to possession of the goods listed in the original Statement of Claim; 2. Defendants to permit the plaintiff to arrange for the taking of possession of the subject goods, such taking of possesion to be at her own expense; 3. I defer for further argument the issue of damages; 4. Defendants to pay the costs of these proceedings; 5. Reserve the parties the right to list the matter before me for any matter that requires determination arising out of this judgment; 6. Judgment is stayed until fees owing by the plaintiff are paid, or the plaintiff satisfies the court as to why she should not pay them.
THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
DOWD J
7 August 2000
N11699/99
BEVERLEY JOY BANKS V LUISA FERRARI AND ORS
REASONS FOR JUDGMENT
1 This is an appeal by the plaintiff, Beverley Joy Banks, under Part 5 of the Justices Act 1902 (NSW) (‘the Act’), for the recovery of her personal chattels which have been detained by the defendants, Luisa Ferrari, John Fausto Ferrari and Ferrari Enterprises of Australia Pty Limited (‘Ferrari Enterprises’).2 The appeal is from a judgment of Barkell M of the Local Court of a claim that the plaintiff have returned to her certain goods. The Learned Magistrate held that having regard to s58(1) of the Bankruptcy Act 1966 (Cth) (‘Bankruptcy Act’), all of the property owned by the plaintiff vested in the Trustee in Bankruptcy consequent upon her having become bankrupt. Her Worship held that the plaintiff did not have a better right to the goods than did the defendants.
3 The finding by Barkell M was that either the plaintiff had no legal rights or entitlement in relation to the goods because of the operation of the vesting provisions of the Bankruptcy Act, or that the plaintiff was unable to claim title to the goods because the Trustee in Bankruptcy exercised a discretion to make no claim to the goods. The Learned Magistrate was, however, of the opinion that the plaintiff was unable to show where in law the Trustee’s discretion existed.
4 The plaintiff’s case is that she has a good title to the goods; that the defendants at the relevant time were not entitled to plead the defence of jus tertii, the title of a third party; that the goods and title to the goods never vested in the Trustee in Bankruptcy; that in any event the Trustee in Bankruptcy made no claim to the goods; and that as a result the goods and title to the goods never vested in the Trustee in Bankruptcy.
6 Under the Act, this court may determine the appeal by either dismissing that appeal or confirming, quashing or setting aside an order appealed against it, or such orders as it thinks just or may remit the matter to the magistrate who made the order.
5 In the alternative, the plaintiff submitted that if the goods did in fact vest in the Trustee in Bankruptcy, then the Trustee in Bankruptcy subsequently assigned the goods in law or in equity to her; and that the plaintiff had better title to the goods than did the defendants who have made no claim to title; and that as a result the goods should be returned by the defendants to the plaintiff.
Factual Background
7 The first and second defendants in the proceedings, who are husband and wife, are the directors of Ferrari Enterprises. Ferrari Enterprises was the former owner and operator of the Lakeview Reception Centre (‘Lakeview’), which is a restaurant located at Box Hill (‘the premises’).8 On 1 December 1995, Ferrari Enterprises and a company, Malgrae and Associates Pty Ltd (‘Malgrae’), entered into a written licence agreement. The agreement was that Malgrae agreed to operate Lakeview at the premises. Malgrae shortly thereafter took both occupation of the premises and commenced operation of the business pursuant to the agreement.
9 Henry George Banks, the plaintiff and one of her sons, Graeme Lachlan Banks, registered Malgrae as a duly incorporated company on 10 October 1991. The directors of Malgrae at its inception were the plaintiff and Graeme Banks.
10 On 23 May 1994, the plaintiff resigned as director of Malgrae. Graeme Banks continued as a director, whereupon Henry Banks was appointed as Chairman and Malcolm Francis George Banks was appointed director. However, following the amendments to the Corporations Law in December 1995, on 22 January 1996 both Graeme and Malcolm Banks resigned as directors of Malgrae.
11 Prior to 20 March 1996, the plaintiff was an employee of Malgrae, and worked in the business that was operated by Malgrae on the premises. The plaintiff had been a shareholder in Malgrae, whereby she owned nine of the ten issued shares. On 27 May 1994, the plaintiff was declared a bankrupt, whereupon all of the her property- in terms of that available under the Bankruptcy Act- including the shares, became vested in the Trustee in Bankruptcy. The plaintiff was discharged from bankruptcy after three years.
12 Although the plaintiff contends that she was not in any material respect a financial contributor to the operation of Malgrae, her evidence was that she was actively involved in the operation of the business that had been licenced to Malgrae. The plaintiff said that her contributions to the business included cooking, washing, cleaning, gardening and organising the music programme.
13 It was not disputed by the second defendant, who gave evidence for the defendants, that the plaintiff was the person in attendance at Lakeview most of the time, and that she was the person who largely ran the business on behalf of Malgrae. I accept that the plaintiff’s contribution to the operation of the business was substantial.
14 Shortly after Malgrae entered into the licence agreement with Ferrari Enterprises, the plaintiff brought onto the premises her own personal effects to decorate, adorn and use in the premises. The plaintiff asserted that at no stage did Malgrae own any of the chattels which are the subject of the proceedings, and that they were at all times her property. She said that they were either purchased by her or were acquired by way of gift or otherwise at a time which preceded the incorporation and registration of Malgrae.
15 Among the personal items which the plaintiff brought onto the premises in an effort to decorate and improve its physical attractiveness, were a Bluthner Grand Piano with a stool and quilted cover, a solid oak occasional table, two Colebrookdale tables and six chairs, an antique wall unit, six dozen crystal white wine glasses, commemorative jugs, several candelabras, cookery books, a number of paintings and items of clothing, perfume and toiletries.
16 In the light of the grand piano becoming the subject of contentious debate during the hearing, together with the fact that it was of considerable monetary value, I will briefly set out how it came into the plaintiff’s possession.
17 The plaintiff said that the piano was purchased in 1983 when her younger son was in Year Nine (9). Although there was another piano present in the plaintiff’s home, the plaintiff purchased the Bluthner from her son’s music teacher as it was a “better one”.
18 The plaintiff gave her son this piano in order that he could use it whilst he was doing his Higher School Certificate studies in Music. The other grand piano was owned by the plaintiff’s son, which was sold in about 1993. The piano which remained in the Banks’ household was thereafter moved onto Ferrari Enterprises’s premises shortly after the licence agreement between Malgrae and Ferrari Enterprises was entered into.
19 In a letter dated 23 October 1998, admitted in evidence, the Trustee in Bankruptcy made no claim to the personal effects brought by the plaintiff onto the defendants’ premises. The Trustee stated that to the extent that any items were owned by the plaintiff, she was free to take any action with regard to those items as she so chose.
20 In the proceedings, there was some contention as to whether Malgrae began trading in mid-December 1995 or mid-January 1996. The plaintiff’s husband asserted that Malgrae began trading in mid-December 1995. He said that they had advertised locally and through the media, and that they also had a number of clients coming for Christmas parties. He informed the court that Lakeview usually opened from Wednesday through to Saturday. He said that during the December trading period, business progressed well. This situation was somehow not replicated throughout January, whereupon Mr Banks considered that business was not progressing as well because it was the holiday period.
21 Contrary to the above assertions, the second defendant contended that Malgrae did not begin trading until mid-January 1996. The second defendant explained that Malgrae held a Christmas party for the plaintiff’s family, but that it did not begin to operate as a restaurant until January 1996. He added that he would often see the plaintiff sitting in the middle of the restaurant “just looking outside”.
22 What is not in contention is that by 20 March 1996, Malgrae had failed to pay part of its bond and was in arrears in occupation fees. Whilst Malgrae had paid for the initial four weeks of rent at four hundred dollars per week ($400), and one half of the bond equalling two thousand dollars ($2,000), two subsequent cheques received by Ferrari Enterprises in January 1996 from Malgrae were dishonoured. The second defendant informed the plaintiff that Malgrae was not to write any more cheques unless there was money in the bank, otherwise he would be obliged to pay the dishonour fee of nine dollars ($9).
23 The plaintiff and Mr Banks experienced financial difficulties as a result of other litigation, wherein Mr Banks had commenced proceedings against a solicitor for the loss of $165,000. A Mr Ken Payne was approached for working capital.
24 Acting on Malgrae’s behalf, Mr Banks communicated Malgrae’s need for some finance for working capital so as to run the Lakeview business.
25 At that time, Mr Banks had been ordered by the relevant court to put up twenty-six thousand dollars ($26,000) as security for costs for the other litigation. Mr Payne enquired as to what assets were available, to which Mr Banks replied that which was brought onto the premises by the plaintiff, along with a motor vehicle. The plaintiff herself communicated that she was willing to offer the piano as security. Mr Payne however declined to proceed with the finance application.
26 No further licence fee or bond was subsequently paid by Malgrae to Ferrari Enterprises.
27 At some time at the end of February 1996, the second defendant spoke to the plaintiff, whereupon he related that he was not prepared to let this state of affairs continue for much longer. He stated that he wanted the second half of the bond (which amounted to two thousand dollars [$2,000]) paid by the end of the month, along with the fulfilment of Malgrae’s commitment in relation to the payment of the licence fee.
28 At a meeting between the plaintiff, Henry Banks and the second defendant towards the end of February 1996, it was agreed that any monies due to Ferrari Enterprises were to be due and payable on 31 March 1996. This was in the form of an oral agreement between Mr Banks and the second defendant. The plaintiff further contended that the second defendant agreed that Malgrae was to be given free rent for the month of March. The second defendant said he made no such admission.
29 By mid-March 1996, the second defendant observed that the licensees were not turning up to conduct the Lakeview business. The second defendant said that whilst there were some comings and goings after 9 March 1996, no-one from the licensee or the plaintiff came to the premises on a regular basis to conduct the business.
30 On 20 March 1996, the second defendant wrote to the licensee informing them that the licence had been cancelled due to the default in the payment of the licence fee, effective immediately. The locks on the doors to the premises were also changed.
31 Mr Banks phoned the second defendant in mid-April 1996 with a view to resolving the matter. The second defendant refused, instead stating that he was initiating court proceedings against Malgrae. Malgrae was however deregistered in August 1996 because, according to Mr Banks, it was no longer operating as a business.
32 The plaintiff’s chattels remained on the premises some years later. Mr Banks recalls that towards the end of 1997, he observed that the plaintiff’s paintings were still hanging on the wall, that the grand piano was situated in the public area of the restaurant and that the oak table was placed just inside the main entrance doors.
33 The plaintiff has however been prevented from gaining access to the premises to remove her belongings. The defendants maintain that they will not return the plaintiff’s goods until the remaining bond and rent have been paid.
Local Court Hearing
34 On 15 September 1998, the plaintiff brought proceedings in the Local Court seeking recovery of her goods which were being held by the defendants. The defendants responded by claiming a lien over the goods. The issues were said to be whether the plaintiff had title to sue; whether the plaintiff had established good title over the goods; and whether the defendants had a bona fide and lawful reason for keeping the goods in their possession.35 The plaintiff submitted that the defendants had acted wrongfully in seizing and detaining the goods because they belonged to her. In their defence, the defendants admitted that they had re-entered possession of Lakeview, but denied that they had wrongfully seized the plaintiff’s goods. They added that the plaintiff did not have an immediate right to possess the goods, and that she was not entitled to recovery of the goods.
36 The plaintiff’s claim to title was based on the claim that the goods were in her possession when detained by the defendants. The plaintiff claimed that the goods were used for the specific purpose of decorating the premises from which Malgrae operated its business.
37 The Learned Magistrate formed the view that the plaintiff was not in possession of the goods but rather, she had bailed them to Malgrae, and that such bailment was either voluntary or gratuitous. The plaintiff contended that as the bailor, she was entitled to the right of immediate possession at the time of detention.
38 In response, the defendants asserted that where the case is based on a claim to a right of immediate possession as opposed to actual possession, the plaintiff must prove that title. The defendants therefore raised the defence of jus tertii- the right and title of a third party.39 The defendants submitted that the plaintiff must fail in her attempts to establish title, firstly because of the plaintiff’s bankruptcy and secondly, on the basis that the plaintiff had transferred the goods to Malgrae.
40 It was contended by the plaintiff that jus tertii was not applicable to this situation. It putting her case, the plaintiff relied on the common law position on the subject which stretched back as far as 1721. In doing so, she endeavoured to demonstrate that as against a wrongdoer, possession is title and that the plaintiff need prove no more than possession The Winkfield [1900-1903] All ER 346 at 352, per Collins MR (hereinafter The Winkfield)..
41 The plaintiff relied on the position as enunciated in an article by F. Pollock and R.S Wright, that possession however acquired is protected against any interference by a mere wrongdoer. They add that the wrongdoer is estopped from defending themself by showing a better title than the plaintiff in some third person, through or under whom they themself do not claim or justify F. Pollock and R.S. Wright., An Essay on Possession in the Common Law (Oxford: Clarendon Press, 1988), at 84-85..
42 In the Learned Magistrate’s opinion, the essential problem with such an assertion was that the authorities were referring to goods taken from the possession of the claimant. She accepted that the defendants were not disputing the fact that possession is a sufficient basis for the plaintiff to maintain an action against a wrongdoer.
43 The Learned Magistrate however found that the plaintiff was not in possession of the goods.
44 The plaintiff claimed that as she had bailed the goods to Malgrae, and that it followed that she had the right of immediate possession as against Malgrae. The Learned Magistrate however held that Malgrae had possession of the goods as opposed to the plaintiff.
45 The plaintiff further contended that the jus tertii argument is only relevant where a plaintiff has no better right to possession than the defendant, or where a third party has a better right than either of them. Contrary to this submission, the Learned Magistrate found that that the essence of a successful defence of jus tertii is that if the plaintiff is to fail, then that is not because a third party has the best right of all, but because the plaintiff does not have a better right than the defendant.
46 In the plaintiff’s submission, the defendants neither had a right to possession or title. She claimed that it was not open for the defendants to argue that title was vested in a third party, that is, the Trustee in Bankruptcy. In any event, she staunchly asserted that the defendants had failed to prove that title was vested in a third party. Rather, the plaintiff submitted that the Trustee never made a claim to the title of the goods. The plaintiff also argued that the defendants failed to prove that the goods belonged to Malgrae.
47 In terms of the plaintiff’s bankruptcy, it was submitted on behalf of the plaintiff that as the goods were acquired by her before the date of bankruptcy, they therefore belonged to her alone.
48 The Learned Magistrate however found this argument unconvincing. She instead relied on s58(1) of the Bankruptcy Act, which relevantly provides:
s58(1) Subject to this Act, where a debtor becomes a bankrupt:
(a) the property of the bankrupt, not being after-acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee; and
(b) after-acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is a trustee of the estate of the bankrupt, in that registered trustee.49 Under s5 of the Bankruptcy Act, property of the bankrupt is relevantly defined as the property divisible amongst the bankrupt’s creditors, and any right and powers in relation to that property, that would have been exercisable if they had not become bankrupt.
50 The Learned Magistrate next relied on s116(1) of the Bankruptcy Act, which provides that subject to the Act, all property that belongs to or was vested in a bankrupt at the commencement of the bankruptcy, or has or is acquired by them or has devolved after the commencement of the bankruptcy and before their discharge, then the capacity to exercise and take proceedings for exercising all such powers in, over or in respect of property as may have been exercised by the bankrupt for his or her own benefit at the commencement of the bankruptcy, or at any time after the commencement of the bankruptcy and before discharge is property that is divisible amongst the bankrupt’s creditors.
51 The defendants contended that by virtue of these provisions, the plaintiff had no title to the goods. They instead submitted that such title was vested in the Trustee in Bankruptcy, and that any right of action that was purportedly available to the plaintiff reverted to the Trustee.
52 The Learned Magistrate held that despite the fact that documents provided by the Trustee in Bankruptcy indicated that they were not going to make a claim over any of the disputed goods, the plaintiff was not able to point to any provision which allowed the trustee to make no claim to the goods. In doing so, the Learned Magistrate accepted the defendant’s contention that the Trustee cannot so disclaim the goods, and that the goods vested in the Trustee by operation of law.
53 The Learned Magistrate ultimately held that in the absence of proof of an assignment or a transfer referable to the past conferred upon the Trustee by the Bankruptcy Act, the goods and any right or action concerning those goods remained with the Trustee in Bankruptcy, and that the plaintiff either had no right at all as a result of the vesting provisions of the Bankruptcy Act, or that she did have good title to the goods because the Trustee in Bankruptcy had exercised some power allowing him to make no claim to the goods. The Learned Magistrate could not find where in law this power existed.
54 The finding of the Local Court was therefore that the plaintiff had no greater right to the goods than did the defendants, whereby her claim was accordingly dismissed.
55 It was held that the question as to whether Malgrae had been given the goods as bailee, or that the goods were abandoned, were found to require no ruling or determination.
Grounds of Appeal
56 The plaintiff has respectively applied for an order that the whole of Barkell M’s decision be set aside. The cause of action pleaded against the defendants was that of conversion and detinue.57 In order to maintain an action for conversion, the plaintiff must have the right to the immediate possession of the goods The Winkfield, note 1 at 349, per Collins MR.. Conversion essentially consists of a positive wrongful act of dealing with goods in a manner which is inconsistent with the rights of the owner. This must be coupled with the intention of denying the owner’s rights or asserting a right that is inconsistent with them. Among such rights is the right of possession to the immediate claim to it Coleman v Harvey [1989] 1 NZLR 723 at 730, per Somers J..
58 In an action for conversion, the aggrieved owner must connect the wrongful conduct with the infringement of a specific right or rights to the goods concerned.
59 The gist of the action of detinue is the wrongful detention of goods. In other words, as Herring CJ states in Bellinger v Autoland Pty LtdBellinger v Autoland Pty Ltd [1962] VR 514, at 520., an action in detinue involves the unlawful failure on the part of the alleged tortfeasor to deliver the goods up when so demanded.
60 To establish an action in detinue, the plaintiff must prove that the following three elements exist. Firstly, the plaintiff must specifically make a demand for the return of the goods on the person who has legal possession of them. The plaintiff’s immediate right to possession must simultaneously subsist at the time the demand is made Timewell v Virgoe (1868) 5 WW&A’B L 147 at 151, per Stawell CJ.. Secondly, the plaintiff’s demand must have been refused by the alleged tortfeasor Nelson and Another v Nelson [1923] St R Qd 37 at 40, per McCawley CJ.. And thirdly, where the goods are in the actual possession of the alleged tortfeasor, the refusal to return the goods to the plaintiff must be unreasonable EE McCurdy Ltd (in liq) v Postmaster-General [1959] NZLR 553 at 556-557, per McGregor J (hereinafter ‘McCurdy’).. In the event that the goods are not in the actual possession of the tortfeasor, the tortfeasor must have wrongfully parted with possession McCurdy, note 8 at 556-557, per McGregor J..
61 An action in detinue where the claimant seeks an order for the return of the goods which have been wrongfully detained, coupled with damages for their wrongful detention, or, as an alternative to the return of the goods, the recovery of the value of those chattels Bellinger, note 5 at 520, per Herring CJ..
62 The distinction between conversion and detinue is that in the former action, the injurious act is the original taking or interference with the dominion of the true owner, whereas the latter injurious act involves the wrongful detention of goods.
63 In undertaking such an action, the plaintiff anticipates that the goods which remain on Ferrari Enterprise’s property be restored to her. She further requests that an award for a separate sum should be made to compensate for having been denied possession of the chattels since the date of detention. The current appeal is grounded on the following bases:
64 The plaintiff submits that the defence should have been struck out at the commencement of or during the proceedings, on the ground that the Local Court did not have the jurisdiction to rule on matters of fact or law in bankruptcy. In doing so, the plaintiff relied on Sutherland v Bryan Sutherland v Brien (Unreported, Austin J, 1 March 1999, Supreme Court of New South Wales), at paras 5-12., and ss27(1), 30(1)(a) and 31(1)(f) of the Bankruptcy Act, which relevantly provide:
Absence of Jurisdiction
s27(1) The Federal Court has jurisdiction in bankruptcy, and that jurisdiction is exclusive of the jurisdiction of all courts other than the jurisdiction of the High Court under section 75 of the Constitution.
S30(1) The Court:(a) has full power to decide all questions, whether of law or of fact, in any case of
S31(1) In exercising jurisdiction under this Act, the Court shall hear and determine
bankruptcy or any matter under Part IX, X or XI coming within the cognizance of
the Court.
the following matters in open Court:
….
(f) applications to declare for or against the title of the trustee to any property.65 The plaintiff submits that taken together, these provisions are to be construed as meaning that the Local Court was not empowered to overturn a decision of the Trustee in Bankruptcy.
66 In my view, the determination by the magistrate did not involve an exercise of the bankruptcy power of the court. Her Worship was merely determining what factually had occurred, and the power of the Federal Court to deal with the Bankruptcy Act does not preclude a state court determining a factual issue arising from a particular set of circumstances where, for instance, a Trustee in Bankruptcy has carried out a particular action.
Bias
67 In the alternative, the plaintiff submits that the Learned Magistrate failed to give full, complete and unbiased considerations to the application of the Bankruptcy Act and its related amendments. It was submitted that the Learned Magistrate erred in applying s166 of the Bankruptcy Act because it has been repealed. The plaintiff relied on the judgment of Branson J in CanWest Global Communication Corporation v Australian Broadcasting AuthorityCanWest Global Communication Corporation v Australian Broadcasting Authority (1997-1998) 50 ALD 877. (hereinafter ‘CanWest’ ), where it was held that:
68 Bias is a matter to be applied for to the tribunal before whom bias is alleged. It does not constitute a ground of appeal, and there does not appear to be any denial of natural justice, and in my view this ground fails.
“…. a breach of rules of natural justice will occur when a decision-maker reaches a decision, or makes a significant finding upon which a decision is based, in disregard or ignorance of the most current and the best information actually or constructively available to the decision-maker relevant to such a decision or finding” Quoted in CanWest , note 12 at 890..
Interference with Powers of the Trustee
69 Further in the alternative, the plaintiff submitted that the Learned Magistrate has interfered with the powers of the Trustee in Bankruptcy, by virtue of ss133 and 134(3) of the Bankruptcy Act. It was asserted that in accordance with these provisions, it was not open to the Learned Magistrate to interfere with the Trustee’s administration of the plaintiff’s estate, because the defendants at all times remained a stranger to the bankruptcy, and as such the defendants and the Local Court remained strangers to the administration of the affairs of the estate.70 In putting forth this argument, the plaintiff relies on the decision of ReMineral Securities Australia Ltd (In Liq) and the Companies ActReMineral Securities Australia Ltd (In Liq) and the Companies Act (1973) 2 NSWLR 207. (hereinafter ‘Mineral Securities’), where it was held that a court of law would not interfere with the Trustee in Bankruptcy’s discretion at the instance of a creditor, unless it was shown that the trustee acted “so absurdly that no reasonable man would so act” Quoted in Mineral Securities, note 14 at 230, per Street CJ in Eq..
71 In my view, a determination by a court on a factual issue as to what a trustee has done does not constitute an interference, and therefore this ground is not made out.
Fresh and Untested Evidence
72 The plaintiff also submits that the defendants’ written submissions contained paraphrased references to selected documentation which was not presented in court, and as such has remained untested evidence.73 The plaintiff has advanced the argument that her case has been prejudiced by the uncertainty as to whether or not such documentation has been tendered to the Learned Magistrate. The plaintiff alleges that she has been denied the opportunity to have this documentation tested as evidence in the court. The plaintiff points to the Freedom of Information Act 1982 (Cth), the Privacy Act 1988 (Cth) and Pt 65 r7 SCR, to assert that these documents are open to challenge.
74 This ground of appeal fails as the hearing in this appeal relates to the issues raised before the magistrate and the plaintiff has not, in my view, established this ground of appeal.
Possession and the Defendant as Wrongdoer76 The principle which operates as between possessor and wrongdoer was set out by Lord Campbell in Jeffries v Great Western Railway CoJeffries v Great Western Railway Co (1856) 5 E&B 802.:
75 As a further ground of appeal, it was submitted by the plaintiff that any possession is a legal possession. That is, possession is lawful and maintainable as against a wrongdoer. Furthermore, a mere finder may recover against a wrongdoer the full value of the goods which had been converted Armory v Delamirie [1558-1774] All ER 121 at 122, per Pratt CJ..
“…. A person possessed of goods has his property as good title as against every stranger, and that one who takes from him, having no title in himself, is a wrongdoer, and cannot defend himself by showing that there was title in some third person; for against a wrongdoer possession is title” Quoted in Jeffries , note 17 at 805, per Lord Campbell CJ..
77 That principle was adopted and further refined by Collins MR in The Winkfield:
“Therefore it is not open to the defendant, being a wrongdoer, to inquire into the nature or limitation of the possessor’s right, and unless it is competent for him to do so the question of his relation to, or liability toward, the true owner cannot come into the discussion at all; and therefore, as between those two parties, full damages have to be paid without any further enquiry…. To hold otherwise would, it seems to me, be in effect to permit a wrongdoer to set up a jus tertii under which he cannot claim.” Quoted in The Winkfield , note 1 at 349..
78 In response to the above allegation, the defendants submitted that the plaintiff failed to discharge the onus of establishing good title, and so the defendants put into issue lack of title. In doing so, the defendants relied on the schedule to the statutory declaration of the second defendant, which confirmed that certain described goods were held by the defendants. The defendants’ position in respect of these goods was that these goods were not the property of the plaintiff, and that the plaintiff does not have the right of immediate possession of the goods.79 The defendants further submitted that the plaintiff’s case, put at its highest, concerns a plaintiff who alleges that her right to immediate possession of the goods has been offended. They submitted that the plaintiff’s case would appear to be that, upon the delivery of the goods and the conferral of possession to Malgrae, Malgae became a bailee at will for the goods, and was responsible for their care and control. If the case is one where the plaintiff bases her claim on a right of immediate possession (as opposed to existing possession), she must then prove her title.
80 Collins MR in The Winkfield further held:81 I will deal with this argument below.
“…. the root principle of the whole discussion is that, as against a wrongdoer, possession is title…. As between bailee and stranger possession gives title that is, not a limited interest, but absolute and compete ownership and he is entitled to receive back a complete equivalent for the whole loss or deterioration of the thing itself” Quoted in The Winkfield , note 1 at 352..
The Defence of Jus Tertii
82 In pleading her case, the plaintiff further submitted that the defence of jus tertii is only applicable where a plaintiff has a better right to possession than the defendant, or where a third party has a better right than either of them.83 One manner in which a defendant can show that the plaintiff does not have a better right than they, is to show that the plaintiff has no right at all because absolute title is vested in a third party.
84 The plaintiff puts forward the argument that such a defence can be in one sense said to be based on the jus tertii, but that it is essential that in such a case, if the plaintiff is to fail, then that is not because a third party has the best right of all, but because the plaintiff themself has not a better right than the defendant Horne v Richardson (1970) 64 QJPR 47 at 48, per Seaman DCJ..
85 The defence of jus tertii is appropriately applied in cases where title as between the defendant and the plaintiff is at issue. The plaintiff rightly pointed to the case of Leake v LovedayLeake v Lovedayand Brooks 134 ER 399 at 402-403, per Tindal CJ., where paramount title and possession in the property had actually passed to the defendant and had never rested with the plaintiff.
86 On this basis, the plaintiff contended that possession with an assertion of title, or even possession alone, gives the possessor such a property right as to enable them to maintain an action against a wrongdoer. In applying such a principle to the present case, the plaintiff submitted that the defendants have no title or right to possession. The second defendant conceded during cross-examination that Ferrari Enterprises made no claim to title to the chattels.
87 It was then asserted by the plaintiff that it was not open to the defendants to argue that title was vested in a third party, where the defendants had arguably failed to establish that title of the chattels was vested in a third party, namely the Trustee in Bankruptcy. The better view on the evidence was argued to be that the Trustee never made a claim to title of the chattels.
88 In response to the above assertions, the defendants submitted that whether jus tertii can be pleaded is dependant on the species of possession alleged to have been offended. If only the actual possession of the plaintiff is alleged to have been offended, then the defence of jus tertii is not available:
“… if the plaintiff was in possession of the goods at the time of the act complained of, the defendant could not set up as a defence a title in some other person under whom he did not claim” Quoted in Halsburys’ Laws of England , vol 45, para 1475..
89 The defendants asserted that the court should reject the plaintiff’s submission that actual possession was offended. The evidence offered in this regard was that Malgrae was a licensee and was in occupation of the restaurant premises; the plaintiff’s husband held the keys to the restaurant business; it was the responsibility of Malgrae to secure the premises and to keep safe any property on the premises, including property allegedly owned by the plaintiff; it was the responsibility of Malgrae to deal with and store the goods when they were on the premises; and the goods were delivered into the possession of Malgrae at the behest of the plaintiff.90 The defendants noted that the important indicia of transferred possession are delivery and the conferral of control to another entity, both of which were found in the above-mentioned evidence.
91 In any event, the defendants contended that the Bankruptcy Act determined the alleged actual possession of the plaintiff:92 I will deal with this argument below.
“As soon as a natural person becomes bankrupt, under s58 of the Bankruptcy Act , all the property of the bankrupt vests immediately in the registered Trustee in Bankruptcy (or, if none, the Official Trustee): see also ss116, 156A(3) and 160. So far as the interests of possession is concerned, bankruptcy deprives the bankrupt of all the attributes of ownership of his or her property, including possession and particularly the right to possess goods and other forms of tangible personalty…. “ Quoted in S. Fisher., Commercial and Personal Property Law (Sydney: Butterworths, 1997), at 85..
General or Possessory Lien
93 By the detention of the goods in question, Ferrari Enterprises has attempted to maintain a possessory lien over the chattels. A possessory lien is the right of a creditor to retain possession of a debtor’s goods until the amount owing is paid for.94 A possessory lien can be of two kinds. It can either be a general or particular lien. A particular lien entitles a creditor to retain goods until a debt associated with those particular goods is paid for. The plaintiff submitted that a particular possessory lien cannot be claimed by the defendants, arguably because the outstanding rent owed by Malgrae was not associated with the chattels in question.
95 In regards to a general possessory lien, this is the right of a creditor to retain the goods of a debtor until they are paid all debts owing. The plaintiff contended that a creditor may only claim a general possessory lien in defined circumstances. This includes where the contract between the creditor and the debtor so provides Quoted in George Barker (Transport) Limited v Eynon (1974) 1 WLR 462, at 469, per Edmund Davies LJ., which arguably does not include the present matter. Another example is where custom or usage allows, such as situations where bankers and solicitors have general possessory liens over clients’ property See Majeau Carrying Company Pty Limited v Coastal Rooftile Ltd (1972-1973) 129 CLR 48 at 53, per Stephen J.. The plaintiff argued that there was no establishment of a custom as between the defendant and the plaintiff in these proceedings.
96 No contractual relationship arises between the plaintiff and the defendants. Any claim which the defendants may have had against Malgrae was against that company, which no longer exists. If the property of another person happens to be left on the premises in circumstances which might otherwise create a lien if owned by a debtor, cannot here apply. Therefore no lien is established in the defendants.
Abandonment
97 The defendants responded to the plaintiff’s above submissions by asserting that Malgrae had abandoned the Lakeview premises by 20 March 1996.98 Abandonment is said to occur when there is a giving up or an absolute relinquishment of private goods by a former owner. Such a state of affairs may arise when the owner of the goods is intent on specific desertion and relinquishment by either casting away the property or by simply leaving it behind Keene v Carter (1994) 12 WAR 20, at 26 per Ipp J..
99 Abandonment is generally raised by a person who reduces the putative goods into their possession as a defence to a claim that an occupier has converted those goods or has wrongfully detained them once a proper demand for their return has been made by the owner.
100 The plaintiff stated that even if Malgrae had deserted the subject premises, it remained irrelevant to the issue of whether the plaintiff voluntarily parted with possession, or whether Ferrari Enterprises had or has any continuing right to possession of the chattels.
101 It was conceded by the defendants that Malgrae was denied entry to the premises by Ferrari Enterprises in mid-March 1996, which was just three weeks after an oral agreement was entered into with Malgrae allowing Malgrae to pay its rental arrears by 31 March 1996.
102 It was submitted by the plaintiff that whilst Ferrari Enterprises may have been entitled to enter the premises for reasons associated with hygiene, the circumstances giving rise to such issues did not by themselves imply, if at all, that Malgrae had abandoned the premises. Rather, Malgrae allegedly never abandoned the premises but was instead experiencing a lack of turnover and funds.
103 It was further submitted that even if it could be said that Malgrae did cease to operate its business shortly after the oral agreement was entered into, Malgrae was still entitled to anticipate that it would be allowed to remain on the premises, at least up until 31 March 1996, there being no other lease default brought to its attention.
104 On the issue of abandonment, the most that was conceded by the plaintiff was that Malgrae may have ceased to operate the business. It therefore did not follow that by reason of ceasing its business, Malgrae abandoned the assets of its business. Such a possibility would have been highly unlikely considering the circumstances. In any event, the plaintiff puts the case that the lessee was legally entitled to a reasonable time to vacate the premises following forfeiture.
105 In opposition to this contention, the defendants presented evidence to the court which was arguably indicative of the plaintiff having abandoned the premises. They pointed to the evidence of Ms Shirley Girotto. Ms Girotto gave evidence concerning the state of the kitchen and the surrounding areas when she lent her assistance to clean the areas in question.
106 Mrs Sonnenveld also gave evidence about her inability to make contact of any kind with the plaintiff as to her booking at the restaurant.
107 It was further noted that the plaintiff acknowledged that by the end of March 1996, Malgrae was obliged to pay Ferrari Enterprises all payments, which to that date were in arrears. The defendants aserted that Malgrae had no liquidity to rely on in relation to that impending deadline.
108 That the company arguably chose to abandon the premises became less remarkable as a proposition when it was recognised that shortly prior to the date for all arrears, the company was unable to pay its debts and relied upon the plaintiff’s husband laying waste to other companies controlled by him for its continued operation. The defendants therefore submitted that the proper result is that the goods be treated as abandoned by Malgrae.
109 Abandonment, even if the goods were the property of Malgrae, does not give rise to any right in the hands of Ferrari Enterprises if the goods were left on the property. It is not open to any person to abandon title to somebody else’s property. If the right to possession was the plaintiff’s, then Malgrae cannot abandon that right. In any event, the defendants’ action in blocking access to the goods prevents it asserting that anyone abandoned the goods.
Bankruptcy
110 In response to the plaintiff’s claim that the Trustee in Bankruptcy had disposed of any claim to the property in dispute, and that she was therefore entitled to the right to immediate possession, the defendant’s rely on ss58(1), 5 and 116 of the Bankruptcy Act to argue that once persons are discharged from bankruptcy, they may litigate in respect of any money that has become owing to them since the date of discharge. The defendants however submit that that is not the case here. They instead submit that any right of action purportedly available to the bankrupt arose during bankruptcy and accordingly, these rights vest in the Trustee in Bankruptcy Daemar v Industrial Commission of NSW and Another (1990-1991) 22 NSWLR 178 at 185, per Kirby P.. The right to sue not having been assigned by the Trustee, the court was urged by the defendants to dismiss the claim.111 Ultimately, the defendant’s submitted that even if the plaintiff had title to the goods, which was disputed, then the right to sue as plaintiff on the alleged cause of action accrued to the Trustee in Bankruptcy as property acquired in the course of bankruptcy O’Brien v Clyne and Another (1985-1986) 64 ALR 129 at 132, per Jackson J.. Accordingly, the defendants argued that in the absence of the proper plaintiff, the proceedings should be dismissed.
112 Section 116 of the Bankruptcy Act specifies what property vests in the Trustee in Bankruptcy. Clearly, because of several categories of excluded property as set out in s116(2) of the Act, some property is outside the property which vests. The Trustee is the person obliged to make such a determination. Clearly, some of the goods the subject of this claim may be goods which may be excluded by the Trustee.
113 The primary issue however is that s116 deals with property in goods, including choses in action, and does not deal with physical location. Also, goods and chattels have to be located somewhere, and the Trustee can dispose physically and determine the location of those goods in any way that he or she wishes, consistent with the rights of creditors. If he or she therefore makes a determination that the goods are located somewhere, it is open to him or her, even if the argument that they may not divest themself of the property in the goods, they may physically allocate possession of those goods to any person, or may allocate the right to obtain possession of them.
114 In my view, the letter which is exhibited in evidence constitutes an allocation of the right to possession in favour of the plaintiff, even if that letter did not constitute a de facto exclusion of the goods from the property of the bankrupt, and therefore the plaintiff is entitled to claim possession of the goods, as against any other claimant.
Transfer to Malgrae
115 In their final submission, the defendants argued that there was evidence of transfer of the goods to Malgrae. Such evidence would arguably suggest an intention on the part of the plaintiff that the goods became the property of the company, along with evidence that the company intended to accept ownership of the goods.116 I am obliged to treat the denials of transfer offered by the plaintiff with caution, in view of independent evidence to the contrary. The defendants submitted that neither witness gave evidence with care, and that they failed to withstand challenge in a number of areas.
117 They further contend that there was evidence that the goods were placed into the possession of the company, and that the company held the key to the premises. An independent witness, Mr Ken Payne, who was present on transfer, heard the declaration of ownership by the plaintiff in the presence of a representative of Malgrae. Mr Payne was at that time assessing an application by the company for credit, and he was aware that the plaintiff was a bankrupt. It was in this context that a list of goods provided to him was allegedly stated by the plaintiff to represent the company’s goods.
118 Additionally, the defendants submitted that that the goods were the property of Malgrae was further corroborated by the fact that the goods were left behind on the premises when Malgrae allegedly abandoned the premises, and for a period of some months thereafter, no claim was made by the plaintiff that the goods were her property.
119 Other than the Trustee in Bankruptcy, who makes no claim to the goods notwithstanding the credibility problem, there is no evidence from which it could reasonably be inferred that anyone other than the plaintiff has a claim to the goods. Any action taken by Malgrae does not interfere with her ownership, and there is no inference that could reasonably be drawn from the goods being in the possession of Malgrae, that the goods were not bailed to Malgrae as contended by the plaintiff.
Conclusion
120 In conclusion, in my view the defendants do not have the right, in their circumstance as involuntary bailee, to set up the right of a third party. Such a right only arises if there is a competing claim between the defendants and the plaintiff for ownership. Ownership is not contended by the defendants.
121 In my view, the argument of the defendants that plead the right of a third party therefore fails.
122 The plaintiff has at least a right to possession of the goods on the basis that the Trustee in Bankruptcy has excluded them from the property of the bankrupt, and has in fact determined that he does not dispute her entitlement to possession of the goods. Such possession, in my view, entitles the plaintiff to bring the original proceedings which are not precluded by the provisions of the Bankruptcy Act which deal with rights of action vested in the bankrupt at the time of bankruptcy.
123 The defendants have been asked for possession of the goods of which the plaintiff is entitled, and they have wrongfully refused to return the subject goods. The plaintiff is entitled to recovery.
124 There has not been adequate argument on the issue of damage, which argument I defer.
125 I therefore set aside the decision of Barkell M of 16 June 1999 in these proceedings.126 The orders that I therefore make are as follows:
Orders
1. I declare that the plaintiff has an entitlement to possession of the goods listed in the original Statement of Claim.
2. I order that the defendants permit the plaintiff to arrange for the taking of possession of the subject goods, such taking of possession to be at her own expense.
3. I defer for further argument the issue of damages.
4. I order that the defendants pay the costs of these proceedings.
5. I reserve to the parties the right to list the matter before me for any matter that requires determination arising out of this judgment.
6. This judgment is stayed until fees owing by the plaintiff are paid, or the plaintiff satisfies the court as to why she should not pay them.
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